SECTION V: HOW TO DETERMINE WHETHER INVESTMENTS ARE PROFITABLE A publisher is deciding whether or not to invest in a new computer. The computer would cost $900, and would increase the cash flows in Year 1 by $500 and in Year 3 by $800. Cash flows do not change in Year 2. a. If the interest rate is 12%, what is the Net Present Value of the investment? b. Is the investment in the new computer feasible when the interest rate is 12%? Please explain. c. If the interest rate rises to 25% what is the Net Present Value of the investment and would the investment still take place?

SECTION V: HOW TO DETERMINE WHETHER INVESTMENTS ARE PROFITABLE A publisher is deciding whether or not to invest in a new computer. The computer would cost $900, and would increase the cash flows in Year 1 by $500 and in Year 3 by $800. Cash flows do not change in Year 2. a. If the interest rate is 12%, what is the Net Present Value of the investment? b. Is the investment in the new computer feasible when the interest rate is 12%? Please explain. c. If the interest rate rises to 25% what is the Net Present Value of the investment and would the investment still take place?

Operations Research : Applications and Algorithms

4th Edition

ISBN:9780534380588

Author:Wayne L. Winston

Publisher:Wayne L. Winston

Chapter16: Probabilistic Inventory Models

Section16.3: The News Vendor Problem: Discrete Demand

Problem 9P

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